Manitoba Budget Hints at Tax Reform

Manitobans were spared tax increases in the April 11, 2017, budget, but the breadth of change to its complicated and voluminous tax credit structure hints at more tax reforms to come.

In a province where 134,000 top earners pay 58% of all personal income taxes, the best news was that the government did not introduce any high-income surtaxes and appeared to be on track to drop 1% of the sales tax by 2020. The worst news was handed to graduates and caregivers. Here are the changes:

1. For Graduates: The Tuition Fee Income Tax Rebate will be capped at 10% of eligible tuition fees to a maximum of $500 in 2017 (this was previously $2500). It will be eliminated completely in 2018 and all unclaimed rebates will lapse. It’s therefore important to make the claim in full, if eligible, on the 2016 and 2017 tax returns.

2. The Tuition Fee Income Tax Rebate Advance was immediately cancelled for terms that begin after April 2017.

3. The Tuition Fee and Education Amounts will stay untouched in Manitoba, as will the Children’s Arts and Cultural Tax Credit and the Fitness Tax Credit; the federal government eliminated these in the March 22, 2017, budget. Also spared are the Adoption Tax Credit, the Fertility Treatment Tax Credit, the Senior’s School Tax Rebate, the Education Property Tax Rebate and the Farmland School Tax Rebates.

4. The Primary Caregiver Tax Credit, which is a refundable credit for caregivers who assist disabled spouses, relatives, neighbors or friends in their own homes will be capped at $1400 starting in 2017. Retroactive claims will be disallowed for years prior to 2017.

5. The Political Contributions Tax Credit will increase starting in the 2018 tax year. The maximum contribution will rise from $1275 to $2325, which computes to a maximum credit of $1000 as follows:

6.  For all Manitobans:  Indexing of personal amounts will affect tax brackets as follows, reflecting indexing factors of 1.5%, 1.8%, 2.0% and 2.0% respectively from 2017 to 2020:

Under the Business Tax regime, the following changes arose in the budget:

1. Research and Development Tax Credit – this was reduced for expenditures after April 11, 2017, to a rate of 15% from 20%.
2. The Manufacturing Investment Tax Credit – was reduced from 2% to 1% on qualified property acquired after April 11, 2017.
3. The Corporate Capital Tax Deduction on small financial institutions was eliminated for fiscal years ending after April 30, 2017.
4. The Mineral Exploration Tax Credit was extended until December 31, 2020.
5. The Book Publishing Tax Credit was extended to December 31, 2018.
6. The Interactive Digital Media Tax Credit was extended to December 31, 2022.

Tax Credits that were immediately eliminated included the following:

1. Co-operative Development Tax Credit
2. Odour Control Tax Credit
3. Nutrient Management Tax Credit
4. Riparian Tax Credit
5. Neighborhood Alive Tax Credit
6. Date Processing Investment Tax Credit

The changes in spending in the budget position Manitoba towards deficit reduction and debt retirement. The province’s economic growth numbers look good: nominal GDP is expected to increase to 3.6% in 2017 and to 3.8% in 2018. The population has grown steadily over the last 7 years to 1,318,128 people, which represents a 1.7% increase.

Evelyn Jacks is President of Knowledge Bureau, Canada’s leading educator in the tax and financial services, and author of 52 books on family tax preparation and planning.

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